Summary

A property development company was entitled to summary judgment for specific performance of a contract containing an option to buy freehold property when it had not been possible to say that the contract required an implied obligation or limitation to make it work.

Facts

The applicant property development company (C) applied for summary judgment against the respondents (R) for specific performance of a contract for the sale of freehold property. C and R had entered into an agreement giving C an option to buy R's freehold property. The option agreement was favourable to C. Payment for the option was £1 and did not oblige C to buy the property but gave it the right to buy, whereas R were subject to a restriction on their freedom to sell during the option period. The length of the option period was therefore of particular interest to R and, critically, there was scope through the provisions in the agreement for the option period to be extended with essentially no real cut-off date. The option agreement had not imposed much by way of obligation on C, however, other than limited obligations in relation to the planning process and the submission of applications. There had been delay, partly at the instigation of C, and particularly in relation to a decision on C's appeal against the refusal of its original application. Having received permission for a separate application, C had withdrawn its appeal and exercised its option to buy the property some 20 months after the agreement had been formed. C submitted, referring to the express terms in the contract and the planning history, that having had its original planning application refused it had served the appeal in time, which had extended the option period and, as there had not been a decision in relation to its appeal, the option period had not expired. R submitted that it could not be right that C had been able to keep the option period open until it had permission for something quite different from the subject of the original appeal and then exercise its option.

Held

For R to have successfully opposed the instant application would have required either that the contract had not given C the right to exercise its option to buy or that something else, for example an implied term, had controlled or limited C's actions under the agreement. If an implied term were found at trial, imposing an obligation on C to have proceeded with due expedition or to have used their best endeavours to obtain consent, and C was found to have breached it, then it might be that C could not take advantage of its own breach to extend the option period and exercise its option to buy as late as it had. On an application for summary judgment, however, it was not essential to rule whether there had been an implied limitation on the contract and the issue was whether R had a real prospect of successfully defending the claim or there was some other compelling reason why the case should be disposed of at trial. Having regard to the issues raised by R, there was no reasonable prospect of an obligation or limitation being implied into the contract and R succeeding at trial. The relevant test was whether the implication of terms was necessary to make the contract work. Although the contract in the instant case had favoured C, with no obligations expressly imposed on it apart from limited obligations in relation to the planning process, it was not possible to say that the contract had failed to work and required a term to be implied to make it work. Implication of a term would produce a different contract, one C had not entered into, and that was not the function of the court. Despite R's concerns at the delay in the planning process and C's role in it, there had been no collateral contract formed, mistake in the agreement, misrepresentation by C or an estoppel that had prevented C from being able to rely on the contractual terms of the agreement.

Application granted